Russian economic policy: A model with discretionary policy or policy rules
DOI:
https://doi.org/10.21638/11701/spbu05.2018.108Abstract
Models of dynamic stochastic general economic equilibrium (DSGE) are based on preferences and technologies. However, the behavior of the state is usually described using exogenous instrumental rules. In the face of significant changes in external conditions, such an approach can poorly predict the behavior of the state and, as a consequence, the economy. A DSGE model of Russia is developed, with the state conducting optimal policy for given purposes, along with a version in which the state follows instrumental rules. Parameters of the models were estimated by the maximum likelihood method and Bayesian inference (with a non-informative a priori distribution). The classical approach has affinity for the version with the optimal policy, and the Bayesian approach for the instrumental rules. The goals of the economic policy pursued in Russia are identified. In particular, the fight against inflation has low priority, and the stability of budget revenues has the highest priority. Estimates of a number of key parameters differ significantly for the two versions of the DSGE model, i.e. the type of state description significantly affects how the model of the rest of the economy should behave in order to comply with statistical data. At the same time, both versions of the model give almost the same quality of forecasts.
Keywords:
DSGE, instrument rules, optimal policy
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References
Литература на русском языке
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Translation of references in Russian into English
Adjemian S., Bastani H., Juillard M., Karame F., Mihoubi F., Perendia G., Pfeifer J., Ratto M., Villemot S. Dynare: Reference Manual, Version 4. Dynare Working Papers, 2011 (1), Cepremap. Available at: http://www.dynare.org (accessed: 20.12.2017).
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Rotemberg J. Sticky Prices in the United States. Journal of Political Economy, 1982, vol. 90, iss. 6, pp. 1187–1211.
Sauer S. Discretion Rather Than Rules? When Is Discretionary Policymaking Better Than the Timeless Perspective? International Journal of Central Banking, 2010, vol. 6, iss. 2, pp. 1–29.
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Smets F., Wouters R. An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area. Journal of the European Economic Association, 2003, vol. 1, iss. 5, pp. 1123–1175.
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Taylor J. Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy, 1993, vol. 39, iss. 1, pp. 195–214.
Tovar C. E. DSGE models and central banks. Economics: The Open-Access, Open-Assessment E-Journal, 2009, no. 3 (16), pp. 1–31.
Wickens M. R. Macroeconomic Theory: A Dynamic General Equilibrium Approach. Princeton University Press, Princeton, 2008, pp. 1–489.
Wickens M. R. How Useful are DSGE Macroeconomic Models for Forecasting? Open Economies Review, 2014, vol. 25, iss. 1, pp. 171–193.
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Published
2018-03-30
How to Cite
Иващенко, С. М. (2018). Russian economic policy: A model with discretionary policy or policy rules. St Petersburg University Journal of Economic Studies, 34(1), 149–172. https://doi.org/10.21638/11701/spbu05.2018.108
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Econometrics and Statistics
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Articles of the St Petersburg University Journal of Economic Studies are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.
